reprinted with permission from Tax Connections
Prior to the enactment of FATCA, Congress and the Executive were in possession of concrete-evidence revealing FATCA would fail to collect any meaningful amount of tax-revenue from U.S. persons evading tax through offshore financial center holdings. Congress should have halted enactment of HIRE – if in fact, FATCA’s purpose was to collect tax-revenue from offshore tax evasion by U.S. persons.
The United States Congress used estimates from the Joint Committee on Taxation (JCT) as the foundation for supporting the Foreign Account Tax Compliance Act (FATCA), contained in the Hiring Incentives to Restore Employment Act (HIRE).
HIRE was a tax expenditure designed to encourage U.S. small business to hire new employees. HIRE included two tax expenditures of note: a payroll tax exemption to employers and a one-thousand dollar tax credit for employers hiring employees between February of 2010 and January of 2011. [1] FATCA was included in HIRE because the tax revenue collected from FATCA was supposed to offset the tax expenditures authorized by HIRE. [2] The tax revenue FATCA was said to be targeting was from U.S. persons with foreign bank accounts who were evading tax.
In July of 2008, and around the time of the UBS scandal and the Global Financial Crisis the U.S. Senate Permanent Subcommittee on Investigations held a hearing and issued a report entitled “Tax Haven Banks and U.S. Tax Compliance”. [3] The underlying justification for FATCA as a substantial revenue raiser rested on a single statement found in a footnote in the 2008 hearing report: “Each year, the United States loses an estimated $100B in tax revenue due to offshore tax abuses.” [4] In a 2009 follow-up report, the Ways and Means’ Subcommittee on Select Revenue Measures held a hearing entitled: Banking Secrecy Practices and Wealthy Americans. During this hearing, the Senate increased the U.S. tax revenue loss-estimate by 50 percent stating: “Contributing to the annual tax gap are offshore tax schemes responsible for lost tax revenues totaling an estimated $150B each year.” [5] The estimates entered into the record during these hearings measured the offshore tax gap, or the amount of tax revenue[6] that would be collected if offshore tax evasion by U.S. persons holding foreign bank accounts was ended. One month, before HIRE was signed into law by President Obama, new evidence revealed the offshore tax gap was nowhere near as large as previously thought.
On February 23, 2010, the JCT released a report estimating that FATCA would instead, only collect $8.7B over ten-years or $870M per year; a huge difference from last-year’s estimate of $150B per year.[7] Assuming this latest estimate was accurate, the 2008 and 2009 estimates were drastically overinflated – to the tune of over $149B annually! At that point, a reasonable person puts on the breaks and asks questions. At the very least Congress should have engaged in some due diligence to determine why there was such a huge discrepancy. After all, there was plenty of time remaining on the legislative clock,[8] and the report invalidated the policy justification for FATCA. Instead, Congress and President Obama steamrolled FATCA into law in less-than a month after the JCT estimate – almost like, they wanted to hurry to get it in, before someone caught wind that the FATCA had nothing to do with closing the fictitious $150B offshore tax gap, because there was really no tax revenue outstanding. (Part I….To Be Continued)
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[1] The Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Pub.L. 111–147, 124 Stat. 71, enacted March 18, 2010, H.R. 2847).
[2] HIRE was originally a $150B dollar incentive package, but the package was reduced to $15B before enactment. It would be interesting to take a look at the timing of the reduction in the HIRE economic incentive package (from $150B to $15B), and compare it with the JCT’s February 23rd estimate, to determine if the reduction in the spending package was a result of learning FATCA would not collect any meaningful amount of tax revenue from offshore accounts, because there was none to collect.
[3] Tax Haven Banks and U.S. Taxpayer Compliance, Senate Permanent Subcomm. on Investigations, Comm. on Homeland Security and Governmental Affairs, 110th Cong. (2008).
[4] Ibid.
[5] Banking Secrecy Practices and Wealthy Americans, Senate Ways and Means Subcomm. on Select Revenue Measures, 111th Cong. (2009). Emphasis added.
[6] In the U.S., we have a 1099 system, where banks are forced to report interest and dividends. Unless there is some income from the account, it follows that there can be no income tax due from that account. The way to determine whether there is income from an account is to require the accountholder’s financial institution to report on the income from the account.
[7] The 2010 JCT report estimate of $8.7B in offshore tax evasion tax-revenue to be collected over ten-years or $870M per year (median average). It should be noted that the report breaks down the estimate by year. Therefore the median average is not the best number to use in every case. Individual calculations based on empirical data from a particular year proving the current validity of the report will incorporate the amounts listed on the report for each relevant year in question to preserve the integrity of the proposition for which the calculation was intended to support.
[8] The House Ways & Means Committee held the Hearing on Banking Secrecy Practices and Wealthy American Taxpayers on March 31st, 2009. The House passed the original version of HIRE on June 18th, 2009. The JCTs estimate was released on February 23rd, 2010. HIRE passed the Senate the following day on February 24th, 2010 (with amendment). The House followed by adding an amendment on March 4th, 2010 (with amendment) which was approved by the Senate on March 17th, 2010. March 18th, 2010, President Obama signed HIRE into law, and thereby FATCA into law as well. Therefore, there was a full month from the time the JCT report was issued, and the day President Obama signed HIRE (containing FATCA) into law. (Part I….To Be Continued)
Ten reasons why FATCA is a complete miserable failure, by Anthony Parent.
https://youtu.be/5BqO9cbyr-E
The “sovereign” countries all want a piece of the american empire pie! It’s the world’s greatest tax heaven. So to comply, those us lap dogs,–bent over, spread their cheeks and signed FATCA.
They hate you. You’re in a toxic, abusive relationship and all the magical thinking of: we needs to, we must, we should, sign this, sign that, hire a 650$ /hr lawyer etc etc. is a futile joke.
You have 2 real options:
1. Repatriate,and say ba bye to that “sovereign” country (us lap dog/us territory).
2 Renounce, and divorce that toxic partner.
Three options actually: comply, renounce, or ignore.
Option 3 shouldn’t be overlooked, if circumstances don’t rule it out. It’s the most popular choice by far. Most expats still don’t comply or renounce.
Thank you Plaxy–agree, one can ignore.
The “sovereign” nations all know where their bread is buttered, and they will NOT stand up forcefully and firmly against the us empire. Will. NOT. They, like 98.7% of americans are in lust with money–hu$lters and hucksters. They need that financial us teet. So, they’ll turn over ANY american “person” etc…next, many any catholic, jew, muslim, where does it stop? Irish need not apply–remember???? Black entrance around the back. Americans–need not apply.
My opinion is that there will more court jestering/lawyer talk ($), and “resistance” nonsense–however, the reality will be more cases thrown out of court, rejected, etc etc…the us and the “sovereign” nations won.
The citizens/persons/tax subjects lost b/c who else will fund the manifest destiny run away freight train and imperialistic endless us wars?
“My opinion is that there will more court jestering/lawyer talk ($), and “resistance” nonsense–however, the reality will be more cases thrown out of court, rejected, etc etc…”
Not always, perhaps. Personally I’m optimistic with regard to the Canadian charter case and also the French case.
Thank you Plaxy–will see what happens esp with duals. What’s next: Irish need not apply? Banks rifling threw their data looking for: Muslim-ess, Italian-ess?
The us empire has no limits as they are hu$lters and hucksters. They have NO friends, just interests (Dulles). The business of america, is business. I see this we need to, we should, petition, resistance, judiciary filings as more of a kabuki dance with the lawyers getting rich, selling false hope, and next yr, next yr talk–racket.
The French usually don’t put up with BS so, we’ll see (the us being a massive tax heaven for “sovereign” countries). Again, surprised how both these govts bent over and spread their cheeks for the us empire. Regardless if the bankers gave em “extreme” pressure etc…. extreme cowardice and traitors. They are OWNED by the us empire.
The first rule of a tax, it must be easy to collect. FATCA$ certainly don’t qualify. Trump pissing off allies. China-Russia building the infrastructure necessary to dump the petrol dollar. The old Breton Woods post WWII financial world order is nearing its final sunset. Can FATCA really matter in future? If can’t reap revenue in 2018, is 2028 going to be better? Go to a pro and get a duplicate genuine ID without a US place of birth. It’s faster.
The voracious appetite of the us empire for its slaves (AKA: tax base) is endless and restless. A narrative that was ontologically empty.
It’s like a bad Termininator movie, with various permutations/ruminations/ideations of a failed empire that just won’t go away. It’s pornographic narrative: Get money, get more money–a hamster wheeling empire that was empty, soulless, and broken.
FATCA/CBT may have some minor tweaking for PC purposes, other than that, CBT will be here to stay, of course all the awyers will keep the light alive (hu$lters), false hopes, endless do nothing revolts-chanting, petitions, we musts, we shoulds, we needs tos will continue–a hamster wheel of someday, next yr, maybe, etc….
Renounce or perhaps, go pro per Don.
@Patricia
No specific mention of the OVDP from the J5, just curious timing:
the OVDP closes Sept 28
recent formation of the J5 for sharing information
maybe it is just a coincidence.
Also, there are the Certifications of FATCA and QI Compliance FIs have to give the IRS this year.
If the IRS wanted to share information gained from the OVDP on FFIs who say they are compliance, but the IRS believe are not based on intelligence gained from the OVDP, and then ask Host Country Tax Authorities to enforce FATCA using this information – a clear path to doing so seems to have been prepared.
“If the IRS wanted to share information gained from the OVDP on FFIs who say they are compliance, but the IRS believe are not based on intelligence gained from the OVDP, and then ask Host Country Tax Authorities to enforce FATCA using this information – a clear path to doing so seems to have been prepared.”
So at present the IRS might believe (on the basis of OVD information) that a non-US-resident accountholder was not compliant with US tax law, yet the account was not reported, therefore the FI was not FATCA-compliant?
@plaxy
Yes, the is pretty much what I am saying.
Via the OVDP the US authorities know which banks may not be FATCA compliant. The IRS can simply share this info via the J5 and ask other J5 members to enforce FATCA using this very specific information.
I explain it here: http://lawprofessors.typepad.com/intfinlaw/2018/07/will-2018q4-see-you-helping-the-authorities-with-their-enquiries-guest-post-by-haydon-perryman.html
Right. I get that. AEOI isn’t being terribly well enforced and OVD information could make it easier for tax authorities to prosecute.
What’s the connection to individual expat USCs?
Or are you suggesting that through the J5 the IRS can “simply” ask IGA 1 partner countries to prosecute their citizens and residents for not paying US tax?
Sure enough, some tax firms do indeed seem to be trying to present the J5 as a fiercer, more “laser-focused” son-of-OVD thingy.
Shiver my timbers.
@plaxy Impact on USC – zero. Impact on individuals – zero. Impact on Financial Institutions – very high.
I am not suggesting individuals have anything to fear.
Thanks for the clarification.
Though individuals wouldn’t “have anything to fear” in any case, since none of the non-US J5 countries does currently incorporate the US tax code.
Just want to reiterate that point, given that some tax advisers do seem to be trying to present J5 as a kind of CBT doomsday machine.
Personally I think it’s mainly about blockchain.
@plaxy Agreed. The J5 has nothing to do with CBT. It does have a connection with Crypto Currencies. It is about sharing what they know. Certainly, Crypto Currencies are a catalyst to its (the J5) formation.
I distinguish between Crypto Currency and Blockchain as I don’t think any authority has an issue with Blockchain technology.
My Belgian bank just sent me an ominous letter, saying they had forwarded my banking information to the government, so they could send it on to another country. On the flip side of the letter was a list of accounts, and the largest of all balances was €1.26. And they are sending it to … France. What France will do with this garbage, God only knows, since France has RBT and I don’t reside there. This is amusing because my Belgian bank should know my birthplace, written on my id documents. Perhaps this is just the CRS form, perhaps they have another mechanism for FATCA, or perhaps they have deemed me (correctly) non reportable.
Plaxy: about the 3 options, renunciation does have a downside. It means that one renounces easy access to the greatest tax haven in the world. I’m only slightly tongue in cheek saying this.
True. But blockchain is easier to spell. 😉
Fred (B) – No kidding, that’s exactly why we’re all in this mess and is also the reason CBT won’t go away: USCs have guaranteed access to the world’s greatest tax-cheating machine – the US tax code.
The only lasting way to extricate foot from mess is to pay the US to take away the access.
@Fred (B) Do you have any nexus to France?
Fred This is wonderful news. Shows that nobody has a clue what they are doing. Garbage in Garbage out.
Maybe they can send all the info to Obshtforbrains who quietly signed FATCA ?
How does the us empire get away with CBT with little roar except for Madame in’t Veld; yet Eritrea gets castigated by the EU council?
mmm….us tax heaven central. Bankers forced their mealy -mouthed jelly fish “sovereign” countries to bend over, spread their cheeks for the us to get that piece of the rotten american pie.
Response to duals/accidentals by americans is predictable–we’re dealing with a low-grade, ontologically empty, couldn’t thk, and soulless populace that was simply a tax base for the empire.
“This is wonderful news. Shows that nobody has a clue what they are doing.”
I fail to see what’s reassuring about that.